Term: EAFE Index
Type: Stock market index
Used in: International equity investing
Also Known As: MSCI EAFE Index
Definition
The EAFE Index — short for Europe, Australasia, and Far East — is a benchmark stock index that tracks the performance of large- and mid-cap stocks in developed markets outside of the U.S. and Canada.
Created by MSCI, it includes countries such as Japan, the U.K., France, Germany, and Australia, but excludes North America. The index is often used by investors and portfolio managers to measure the performance of international developed markets.
It serves as the basis for many international mutual funds and ETFs, such as the iShares MSCI EAFE ETF (EFA).
Key Features
- Tracks stocks in developed countries outside North America
- Covers Europe, Australasia, and the Far East
- Includes large- and mid-cap equities
- Weighted by market capitalization
- Often used as a benchmark for international funds
Common Use Cases
- Evaluating international portfolio performance
- Benchmarking foreign equity mutual funds and ETFs
- Diversifying U.S.-based portfolios
- Passive investing in global developed markets
Benefits or Advantages
- Exposure to non-U.S. developed markets
- Enhances global diversification
- Covers a broad range of industries and economies
- Useful benchmark for fund comparison
Examples or Notable Applications
– iShares MSCI EAFE ETF (EFA) is one of the most popular EAFE-based ETFs
– Frequently cited in financial news as an international benchmark
– Often compared with the MSCI Emerging Markets Index
– Commonly used in target-date retirement funds
External Links
This post is for informational purposes only and does not constitute investment advice.